Blender's 'Set Smooth' button actually functions more in the rendering context. What it does is recalculate the normals based on the vertices and faces, taking into account an 'averaging' of the normals in order to achieve that smooth look when lit. When you choose 'Set Solid', in contrast, it calculates the normals solely based on the faces. In addition, there's the shading algorithm that's being used to render the scene which can impact how smooth a mesh looks.

So, there are a couple of things you can do to emulate this behavior in Crystal Space:

1) Export your mesh from Blender so that 'Set Smooth' is enabled, making the normals behave as if the mesh were smooth.2) Change the geometry of your mesh so that it's more subdivided, thus making the actual surface appear smoother because there are more polygons. This is a balancing act, though - you don't want to subdivide everything, because then you will innundate your scene with polygons, and it may take longer to render. 3) Change the shader used to more accurately compute the color you want at a given pixel based on input geometry, normals, and lighting.